If mileage is a factor on your personal or business tax return, the Internal Revenue Service (IRS) increased the standard mileage rate for 2023.
The standard mileage rate applies to taxpayers deducting vehicle costs used for charitable, business, medical, or moving. As of January 1, 2023, the IRS adjusted the rate per mile you can use for a deduction.
The IRS notes that it calculates the business use rate each year after it looks at fixed and variable costs of operating a vehicle. We have all watched fuel costs fluctuate widely in the past several years. That said, the same rates apply for electric and hybrid vehicles as well as gas and diesel-powered cars.
There are a couple of obvious and non-obvious caveats to the mileage rates. The IRS will not allow a miscellaneous taxpayer deduction for unreimbursed employee travel expenses. The moving mileage rate is applicable only to Armed Service personnel on active duty and subject to a moving order.
The updated standard mileage rates are:
- Business: There is a three-cent increase from the midyear mileage boost provided in the last half of 2022. A rate of 66.5 cents now applies for business use.
- Charitable organizations: If you drive on behalf of a charitable organization, you can claim 14 cents per mile. The rate did not increase from the standard mileage rate allowed in 2022.
- Medical and moving: The 22 cents per mile standard rate remains the same as the rate which was increased at the half-year mark in 2022. This rate is allowed for use for medical purposes or, as noted, for members of the Armed Services.
According to the IRS, taxpayers generally use the standard mileage rate for the first year the vehicle is used for business purposes. Thereafter, a taxpayer can use the standard mileage rate or your actual expense.
When claiming mileage for these purposes on your tax return, be sure to keep a mileage log that reflects the date, destination, and purpose of each trip on which mileage is claimed. If you are not able to prove your deduction, the IRS can either estimate what they believe to be the true deduction, or disallow it altogether.
While a small thing, miles, and mileage add up. Be sure your return, personal or business, takes advantage of the deductions available to you.
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The legal team at Robert J. Fedor, Esq., LLC provides experienced legal representation to clients throughout the U.S. and abroad on matters of tax audits, tax crime, and bankruptcy. When you have tax questions, call us at 800-579-0997 or contact us. We have offices in Cleveland and Chicago.